Additional Application
Summary
of the article:
Labor Shortage in China May Lead to Trade Shift
By David Barbosa
The New York Times
April 3, 2006
A changing Chinese economy has resulted in significant labor shortages. Factories continue to expand as China’s economy grows, but the number of uneducated workers is declining and the population of young people is leveling off. Add to these an increased number of people remaining inland, and this leaves coastal regions which specialize in factory production and exports with a large number of job openings.
The labor shortages are resulting in wage increases, pushing up costs on Chinese-made products. This could make China less competitive in global markets. Anticipating a continuation of rising costs for Chinese manufacturing, international manufacturers are already looking at moving factories to countries with lower costs.
The increase in wages is also fueling a growing Chinese middle class. Minimum wages in big cities have grown roughly 25% over the past three years, and infrastructure, housing and retail projects have started to develop in more rural areas. The number of people going to college has also increased significantly. In 2005, over 14 million people enrolled in Chinese colleges and universities, an increase of more than 250% since 1999.
Labor shortages and the resulting cost and wage increases may prompt even more changes in China. Labor conditions and worker benefits have already started to improve, and increased manufacturing costs could cause a shift away from the production of lower-end products. Rising wages could create an increased demand for imports, and factories have started moving inland, where labor is more readily available.
9) This Application reinforces the basic definition of economics, which is the
A) possible or feasible combinations of an economy's production options.
B) study of choices made by people when there is scarcity.
C) arrangement that allows buyers and sellers to exchange things.
D) forces that affect economic activity and predict the consequences of alternative actions.
Answer: B
Diff: 1
Topic: Additional Application, Labor Shortage in China May Lead to Trade Shift
Skill: Definition
10) What factor of production is the primary focus of this Application?
A) natural resources
B) physical capital
C) labor
D) entrepreneurship
Answer: C
Diff: 1
Topic: Additional Application, Labor Shortage in China May Lead to Trade Shift
Skill: Conceptual
AACSB: Reflective Thinking
11) According to the Application, the number of people in China who are going to college has increased significantly. An increase in college enrollment leads to a more educated workforce and, in turn, higher wages. Obtaining an education in order to receive a higher wage is an example of which element of the economic way of thinking?
A) thinking at the margin
B) response to incentives
C) isolation of variables
D) using assumptions to simplify
Answer: B
Diff: 1
Topic: Additional Application, Labor Shortage in China May Lead to Trade Shift
Skill: Conceptual
AACSB: Reflective Thinking
12) One of the macroeconomic issues addressed in this Application is
A) companies increasing worker benefits.
B) the increase in college enrollment.
C) the growth of the Chinese economy.
D) the decisions by workers to remain inland.
Answer: C
Diff: 1
Topic: Additional Application, Labor Shortage in China May Lead to Trade Shift
Skill: Conceptual
AACSB: Reflective Thinking
13) Normative economics
A) is the focus of most modern economic reasoning.
B) answers the question "What ought to be?"
C) predicts the consequences of alternative actions.
D) answers the question "What is?"
Answer: B
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Definition
14) Which of the following is an example of a normative question?
A) How will an increase in the capital gains tax affect small businesses?
B) What fraction of an income-tax cut will be spent on imported goods?
C) Should a state government implement a state lottery to fund public education?
D) How will an increase in unemployment benefits affect the unemployment rate?
Answer: C
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Conceptual
AACSB: Reflective Thinking
15) Which of the following is a question answered with positive economic analysis?
A) Should the college pay for textbooks for students?
B) Should the college charge more for out-of-state tuition than in-state tuition?
C) If the college reduced its eligibility requirements for enrollment, will class sizes increase?
D) Should the college eliminate its athletic program to cut its costs?
Answer: C
Diff: 2
Topic: Positive versus Normative Analysis
Skill: Conceptual
AACSB: Reflective Thinking
16) Which of the following is a question answered with normative economic reasoning?
A) If the college offers free textbooks for students, will more students read their textbooks?
B) If the college provided less financial aid for out-of-state students, would more in-state students benefit?
C) If the college increased its enrollment requirements, would class size decline?
D) Should the college increase tuition to fund its athletic programs?
Answer: D
Diff: 2
Topic: Positive versus Normative Analysis
Skill: Conceptual
AACSB: Reflective Thinking
17) The 3 key economic questions include all of the following EXCEPT
A) "what products do we produce?".
B) "how do we produce these products?".
C) "where should these products be produced?".
D) "who consumes the products?".
Answer: C
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who?
Skill: Conceptual
AACSB: Reflective Thinking
18) Deciding how a society's products are distributed among its citizens answers the economic question of
A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.
Answer: A
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who?
Skill: Conceptual
AACSB: Reflective Thinking
19) Deciding if a company will produce automobiles by robotics or manual labor answers the economic question of
A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.
Answer: D
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who?
Skill: Conceptual
AACSB: Reflective Thinking
20) Deciding if a power company will generate electricity from wind power or coal answers the economic question of
A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.
Answer: D
Diff: 2
Topic: The Three Key Economic Questions: What, How, and Who?
Skill: Conceptual
AACSB: Reflective Thinking
21) An economic model is a
A) realistic version of an economic environment.
B) detailed version of an economic issue.
C) fictional representation of an entire economy.
D) simplified representation of an economic environment.
Answer: D
Diff: 1
Topic: Economic Models
Skill: Definition
22) Economic models are used to
A) explain every detail of an economic theory.
B) explore decision making by individuals, firms and other organizations.
C) build physical renditions of government construction projects.
D) represent the complexities of economic environments.
Answer: B
Diff: 1
Topic: Economic Models
Skill: Conceptual
AACSB: Reflective Thinking
23) Talking about alternatives is the first step in a process that helps us make better choices about how we use our resources.
Answer: TRUE
Diff: 1
Topic: What Is Economics?
Skill: Analytical
AACSB: Analytical Skills
24) In the past few centuries, choices have led to a substantial decline in the standards of living around the globe.
Answer: FALSE
Diff: 1
Topic: What Is Economics?
Skill: Fact
25) Scarcity is a situation in which resources are unlimited in quantity and can be used in different ways.
Answer: FALSE
Diff: 1
Topic: What Is Economics?
Skill: Definition
26) Positive economics question, "What ought to be?" Normative economics predicts the consequences of alternative actions, answering the questions, "What is?" or "What will be?"
Answer: FALSE
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Definition
27) Normative economics question, "What ought to be?" Positive economics predicts the consequences of alternative actions, answering the questions, "What is?" or "What will be?"
Answer: TRUE
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Definition
28) Most modern economic analysis is normative in nature, but involves questions with positive aspects.
Answer: FALSE
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Fact
29) Economists will always reach the same conclusion in their positive analyses. Answer: FALSE
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Conceptual
AACSB: Reflective Thinking
30) One of the key economic questions is "where should products be produced?" Answer: FALSE
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who?
Skill: Conceptual
AACSB: Reflective Thinking
31) One of the key economic questions is "who consumes the products?"
Answer: TRUE
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who? Skill: Conceptual
AACSB: Reflective Thinking
32) An economic model is a detailed version of an economic environment. Answer: FALSE
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who? Skill: Definition
33) Economic models explore decision making by individuals, firms and other organizations. Answer: TRUE
Diff: 1
Topic: The Three Key Economic Questions: What, How, and Who?
Skill: Conceptual
AACSB: Reflective Thinking
34) Would an economist consider clean air a scarce resource? Explain. Answer: Yes, because the air had alternative uses. We can choose to use it to either breathe or to undertake activities that pollute it. The more we want to breathe clean air the more we must limit the production of pollutants. The more we pollute the air the less we can breathe clean air.
Diff: 2
Topic: What Is Economics?
Skill: Analytical
AACSB: Analytical Skills
35) List and briefly describe the five factors of production.
Answer: Natural resources – those resources provided by nature. Labor – the physical and mental effort used by people to produce goods and services. Physical capital – the infrastructure, equipment, machines and structures used to produce goods and services. Human capital – the knowledge and skills obtained by workers through education and experience. Entrepreneurship –the organizing and coordination of the other four factors of production needed to produce and sell products.
Diff: 2
Topic: What Is Economics?
Skill: Conceptual
AACSB: Reflective Thinking
36) Give an example of something that is scarce in your life and explain the choices you've made because of scarcity.
Answer: Responses are numerous and will vary by students.
Diff: 1
Topic: What Is Economics?
Skill: Analytical
AACSB: Analytical Skills
37) Positive economic analysis answers what question?
Answer: Positive economic analysis answers the question "what is" or "what will be."
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Conceptual
AACSB: Reflective Thinking
38) Normative economic analysis answers what question?
Answer: Normative economic analysis answers the question "what ought to be."
Diff: 1
Topic: Positive versus Normative Analysis
Skill: Conceptual
AACSB: Reflective Thinking
39) Richard runs a pizza delivery restaurant. List the three basic types of decisions economics studies and give an example from Richard's restaurant.
Answer: How much to produce? How many pizzas will be sold each day? What to produce? What sorts of pizza do people order? Who consumes the products? Which people decided to come to the restaurant on a given day?
Diff: 2
Topic: The Three Key Economic Questions: What, How, and Who? Skill: Analytical
AACSB: Analytical Skills
1.2 Economic Analysis and Modern Problems
1) According to the Texas Transportation Institute, the typical U.S. commuter wastes approximately how much time per year due to traffic congestion?
A) 14 hours
B) 22 hours
C) 47 hours
D) 96 hours
Answer: C
Diff: 1
Topic: Economic View of Traffic Congestion Skill: Fact
2) In the final two decades of the twentieth century, average per capita global income
A) increased by approximately 35 percent.
B) remained relatively unchanged.
C) decreased by approximately 6 percent.
D) increased by more than 75 percent.
Answer: A
Diff: 1
Topic: Economic View of Poverty in Africa Skill: Fact
3) In the final two decades of the twentieth century, per capita income in sub-Saharan Africa
A) increased by approximately 35 percent.
B) remained relatively unchanged.
C) decreased by approximately 6 percent.
D) increased by more than 75 percent.
Answer: C
Diff: 1
Topic: Economic View of Poverty in Africa Skill: Fact
4) From 1992-2002, Japanese per capita income
A) increased by more than 250 percent.
B) doubled.
C) either decreased or only slightly increased. D) fell to zero.
Answer: C
Diff: 1
Topic: Economic View of Japan's Economic Problems
Skill: Fact
5) In response to Japan's stagnant economy of the 1990s, economists designed policies to do all of the following EXCEPT
A) stimulate business spending.
B) stimulate consumer spending.
C) accelerate deflation.
D) make needed changes to the Japanese financial system.
Answer: C
Diff: 1
Topic: Economic View of Japan's Economic Problems
Skill: Fact
1.3 The Economic Way of Thinking
1) Who is associated with the following summary of the economic way of thinking?: "The theory of economics does not furnish a body of settled conclusions immediately acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its processer draw correct conclusions."
A) John Maynard Keynes
B) Alfred Marshall
C) Adam Smith
D) President Harry Truman
Answer: A
Diff: 1
Topic: The Economic Way of Thinking
Skill: Fact
2) To make things simpler and focus attention on what really matters, economists would A) use assumptions.
B) ignore all variables.
C) think at the margin.
D) respond to incentives.
Answer: A
Diff: 1
Topic: Use Assumptions to Simplify
Skill: Conceptual
AACSB: Reflective Thinking
3) A variable measures
A) something that always has the same value.
B) something that can take on different values.
C) factors that occur with high degrees of uncertainty.
D) the degree to which something varies over time.
Answer: B
Diff: 1
Topic: Isolate Variables - Ceteris Paribus Skill: Definition
4) The Latin phrase ceteris paribus means that when a relationship between two variables is being studied
A) both are treated as unpredictable.
B) neither of those two variables is allowed to change.
C) all other variables are held fixed.
D) we recognize that some factors are unknown.
Answer: C
Diff: 1
Topic: Isolate Variables - Ceteris Paribus Skill: Definition
5) To think at the margin means to consider
A) how nothing remains constant over time.
B) how a small change in one variable affects another variable.
C) how people behave in their own self-interest.
D) how people will decide what to purchase.
Answer: B
Diff: 1
Topic: Think at the Margin Skill: Fact
6) A student has a "D" average in her accounting course and a "B" average in her economics course. She decides to study an extra hour for her accounting exam. This is an example of
A) thinking at the margin.
B) using assumptions to simplify.
C) ceteris paribus.
D) caveat emptor.
Answer: A
Diff: 1
Topic: Think at the Margin
Skill: Conceptual
AACSB: Reflective Thinking
7) A small change in a variable is
A) an average change.
B) a ceteris paribus change.
C) an efficient change.
D) a marginal change.
Answer: D
Diff: 1
Topic: Think at the Margin
Skill: Definition
8) Adam Smith
A) is considered the founder of economics.
B) introduced the concept of ceteris paribus to the discussion of supply and demand.
C) is responsible for refining the model of supply and demand.
D) is the author of this text.
Answer: A
Diff: 1
Topic: Rational People Respond to Incentives
Skill: Conceptual
AACSB: Reflective Thinking
9) When economists assume that people are rational and respond to incentives, they mean
A) people act with kindness.
B) people are altruistic.
C) people act in their own self-interest.
D) people are selfish.
Answer: C
Diff: 1
Topic: Rational People Respond to Incentives
Skill: Conceptual
AACSB: Reflective Thinking
10) Using assumptions to make things simpler and focus attention on what really matters is like using a road map to plan a trip.
Answer: TRUE
Diff: 1
Topic: Use Assumptions to Simplify
Skill: Conceptual
AACSB: Reflective Thinking
11) Ceteris paribus means "Let the buyer beware".
Answer: FALSE
Diff: 1
Topic: Isolate Variables - Ceteris Paribus
Skill: Definition
12) Ceteris paribus is the same as rise / run.
Answer: FALSE
Diff: 1
Topic: Isolate Variables - Ceteris Paribus
Skill: Definition
13) A small, one-unit change in value is called a marginal change.
Answer: TRUE
Diff: 1
Topic: Think at the Margin
Skill: Definition
14) A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives.
Answer: TRUE
Diff: 1
Topic: Rational People Respond to Incentives
Skill: Conceptual
AACSB: Reflective Thinking
15) A key assumption of most economic analysis is that people are altruistic, meaning that they act in their own self-interest.
Answer: FALSE
Diff: 1
Topic: Rational People Respond to Incentives
Skill: Conceptual
AACSB: Reflective Thinking
16) Economists assume that individuals make informed decisions and act in their own selfinterest.
Answer: TRUE
Diff: 1
Topic: Rational People Respond to Incentives
Skill: Conceptual
AACSB: Reflective Thinking
17) What is meant by the term "marginal change"?
Answer: A marginal change is a small, one unit change in value.
Diff: 1
Topic: Think at the Margin
Skill: Definition
1.4 Example: London Addresses its Congestion Problem
1) When deciding to implement a congestion tax, economists and the government would use the elements of the economic way of thinking to determine
A) if the tax would be allocated equitably.
B) what tax amount should be charged.
C) who should be exempt from the tax.
D) how much revenue will the tax generate.
Answer: B
Diff: 1
Topic: London Addresses its Congestion Problem
Skill: Conceptual
AACSB: Reflective Thinking
2) After the implementation of the congestion tax in London, traffic volume was reduced and travel time for cars and buses was cut in half. This is an example of
A) responding to incentives.
B) the role of pricing in allocating resources.
C) caveat emptor.
D) comparative advantage.
Answer: A
Diff: 1
Topic: London Addresses its Congestion Problem
Skill: Conceptual
AACSB: Reflective Thinking
3) When determining an appropriate congestion tax economists would use which of the following elements of the economic way of thinking?
A) thinking at the margin
B) isolating variables
C) making assumptions
D) all of the above
Answer: D
Diff: 2
Topic: London Addresses its Congestion Problem
Skill: Conceptual
AACSB: Reflective Thinking
Recall the Application about the experiment in which some children had to pedal a bicycle in order to watch television to answer the following question(s).
4) According to the Application, children who had to pedal a bicycle to watch TV watched less TV than those who did not have to pedal. This is an example of
A) responding to incentives.
B) thinking at the margin.
C) isolating variables.
D) using assumptions to simplify.
Answer: A
Diff: 1
Topic: Application 1, Pedaling for Television Time
Skill: Conceptual
AACSB: Reflective Thinking
5) The results of the experiment discussed in this Application show the differences in television viewing time for children who either did or did not have to pedal a bicycle in order to watch TV. These results describe the economic concept of
A) using assumptions to simplify.
B) ceteris paribus.
C) marginal thinking.
D) rational self interest.
Answer: D
Diff: 1
Topic: Application 1, Pedaling for Television Time
Skill: Conceptual
AACSB: Reflective Thinking
6) According to the Application, children who had to pedal a bicycle to watch television watched an average of 2 hours per week, while children who did not have to pedal watched an average of 21 hours per week. Based on these numbers, the children who did not pedal watched an average of ________ percent more television per week than those who did have to pedal.
A) 91
B) 540
C) 950
D) 1050
Answer: C
Diff: 2
Topic: Application 1, Pedaling for Television Time
Skill: Analytical
AACSB: Analytical Skills
Recall the Application about unwanted commercial e-mail, or spam, to answer the following question(s).
7) According to the Application, the economic approach to spam is to
A) establish a price for commercial e-mail.
B) ignore the spam issue because it has no economic implications.
C) have it legislated on the local level since it is a microeconomic issue.
D) ban all e-mail from international servers.
Answer: A
Diff: 2
Topic: Application 2, The Economic Solution To Spam
Skill: Conceptual
AACSB: Reflective Thinking
8) According to the Application, the amount of e-mail spam would significantly decrease if A) the cost of sending spam exceeded its profitability.
B) states passed laws making spam illegal.
C) e-mail filters were developed to separate spam from legitimate e-mail.
D) more people responded to spam e-mails.
Answer: A
Diff: 2
Topic: Application 2, The Economic Solution To Spam
Skill: Conceptual
AACSB: Reflective Thinking
9) The congestion tax implemented in London reduced traffic volume and cut travel time for cars and buses in half.
Answer: TRUE
Diff: 1
Topic: London Addresses its Congestion Problem
Skill: Fact
10) To determine an appropriate congestion tax, an economist had to assume that people respond to incentives.
Answer: TRUE
Diff: 1
Topic: London Addresses its Congestion Problem
Skill: Conceptual
AACSB: Reflective Thinking
Recall the Application about unwanted commercial e-mail, or spam, to answer the following question(s).
11) According to the Application, one idea to reduce the volume of e-mail spam is to charge the sender for each commercial e-mail sent.
Answer: FALSE
Diff: 1
Topic: Application 2, The Economic Solution To Spam
Skill: Fact
1.5 Preview of Coming Attractions: Macroeconomics
1) Macroeconomics is best described as the study of
A) very large issues.
B) the choices made by individual households, firms, and governments.
C) the nation's economy as a whole.
D) the relationship between inflation and wage inequality.
Answer: C
Diff: 1
Topic: Preview of Coming Attractions: Macroeconomics
Skill: Definition
2) Which of the following is a macroeconomic question?
A) Should we have a constitutional amendment requiring the government to implement a national consumption tax to replace the current income tax?
B) Why did a leading computer manufacturer establish call centers in India?
C) Why does a pharmaceutical manufacturer try to lower its production costs?
D) Should the government put a tax on alcohol in an attempt to assist in the funding of support groups like Alcoholics Anonymous?
Answer: A
Diff: 2
Topic: Preview of Coming Attractions: Macroeconomics
Skill: Conceptual
AACSB: Reflective Thinking
3) Which of the following is NOT a macroeconomic question?
A) Should we have a constitutional amendment requiring the government to implement a national consumption tax to replace the current income tax?
B) Do retailers discriminate against part-time employees by not providing them with healthcare benefits?
C) How does a Congressional economic reform package affect the unemployment rate?
D) Should the president restrict immigration to reduce unemployment?
Answer: B
Diff: 2
Topic: Preview of Coming Attractions: Macroeconomics
Skill: Conceptual
AACSB: Reflective Thinking
4) We can use macroeconomic analysis to A) learn how to balance a checkbook.
B) study the choices made by households.
C) understand marginal changes in the macroeconomy.
D) understand why economies grow.
Answer: D
Diff: 2
Topic: Using Macroeconomics to Understand Why Economies Grow
Skill: Conceptual
AACSB: Reflective Thinking
5) Macroeconomics involves the study of the decision-making of individual firms or individuals. Answer: FALSE
Diff: 1
Topic: Preview of Coming Attractions: Macroeconomics
Skill: Conceptual
AACSB: Reflective Thinking
6) Macroeconomics helps explain economic fluctuations, why the economy shrinks and expands and why some of the economy's resources are idle.
Answer: TRUE
Diff: 1
Topic: Using Macroeconomics to Understand Economic Fluctuations
Skill: Conceptual
AACSB: Reflective Thinking
7) Describe the field of economics known as macroeconomics.
Answer: Macroeconomics is the study of the nation's economy as a whole. Macroeconomics focuses on the issues of inflation, unemployment and economic growth.
Diff: 1
Topic: Preview of Coming Attractions: Macroeconomics
Skill: Definition
8) Explain three ways we can use macroeconomic analysis.
Answer: Macroeconomics explains why some resources increase over time and how an increase in these resources translates into a higher standard of living. In the fastest-growing countries, citizens save a large fraction of the money they earn. Firms can then borrow the funds saved to purchase machinery and equipment that make their workers more productive. The fastest growing countries also have well-educated workforces, allowing firms to quickly adopt new technologies that increase worker productivity. All economies, including ones that experience a general trend of growth, are subject to economic fluctuations including periods when the economy shrinks. During an economic downturn, some of the economy's resources are idle. Many workers are unemployed, and many factories and stores are closed. By contrast, sometimes the economy grows too rapidly, causing inflation. Macroeconomics helps us understand why these fluctuations occur–why the economy sometimes cools and sometimes overheats–and what we can do to moderate the fluctuations. A third reason for studying macroeconomics is to make informed business decisions. A manager who intends to borrow money for a new factory or store could use her knowledge of macroeconomics to predict the effects of current public policies on interest rates and then decide whether to borrow the money now or later.
Diff: 1
Topic: Preview of Coming Attractions: Macroeconomics
Skill: Conceptual
AACSB: Reflective Thinking
1.6 Preview of Coming Attractions: Microeconomics
1) The study of the choices made by individual households, firms, and government is called A) macroeconomics.
B) microeconomics.
C) managerial economics.
D) market economics.
Answer: B
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Definition
2) Microeconomics is best described as the study of A) the choices made by individual households, firms, and governments.
B) inflation, unemployment, gross national product, and the nation's economy as a whole.
C) how markets interact in the aggregate economy.
D) marginal changes in the economy.
Answer: A
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Definition
3) Which of the following is a microeconomic question?
A) Is it sensible for a company to reimburse its employees for college tuition?
B) Why do some countries have higher unemployment rates than other countries?
C) Should Congress and the president take action to stimulate the economy?
D) Should the Fed attempt to influence the interest rate to stimulate job growth?
Answer: A
Diff: 2
Topic: Using Microeconomics to Evaluate Public Policies
Skill: Conceptual
AACSB: Reflective Thinking
4) Which of the following is a microeconomic question?
A) Should the government decrease unemployment benefits to reduce the unemployment rate ?
B) Why do some countries grow faster than others?
C) Should the government prevent an airline from flying to certain international destinations?
D) Should congress increase taxes to help reduce the national debt?
Answer: C
Diff: 2
Topic: Using Microeconomics to Evaluate Public Policies
Skill: Conceptual
AACSB: Reflective Thinking
5) Microeconomics helps explain economic fluctuations, why the economy shrinks and expands and why some of the economy's resources are idle.
Answer: FALSE
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Conceptual
AACSB: Reflective Thinking
6) Microeconomics is the study of aggregate behavior in the economy.
Answer: FALSE
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Definition
7) One example of a microeconomic question is, "How will prices in the airline industry change if the government allows a merger between two large airlines?"
Answer: TRUE
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Conceptual
AACSB: Reflective Thinking
8) One example of a microeconomic question is, "Should unemployment benefits be increased?"
Answer: FALSE
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Conceptual
AACSB: Reflective Thinking
9) Describe the field of economics known as microeconomics.
Answer: Microeconomics is the study of the choices made by households, firms and government and how these choices affect the markets for goods and services.
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Definition
10) Explain three ways we can use microeconomic analysis.
Answer: One reason for studying microeconomics is to better understand how markets work. Once you know how markets operate, you can use economic analysis to predict how various events affect product prices and quantities. On the personal level, we use economic analysis to decide how to spend our time, what career to pursue, and how to spend and save the money we earn. As workers, we use economic analysis to decide how to produce goods and services, how much to produce, and how much to charge for them. While societies use markets to make most of the decisions concerning production and consumption, the government has several important roles in a market-based society. We can use economic analysis to determine how well the government performs its roles in the market economy. We can also explore the trade-offs associated with various public policies.
Diff: 1
Topic: Preview of Coming Attractions: Microeconomics
Skill: Conceptual
AACSB: Reflective Thinking
1.7 Appendix A: Using Graphs and Percentages
1) There is a positive relationship between two variables if A) they move in opposite directions. B) they move in the same direction.
C) one variable changes and the other does not.
D) neither variable moves.
Answer: B
Diff: 1
Topic: Graphing Two Variables
Skill: Definition
2) There is a negative relationship between two variables if A) they move in opposite directions.
B) they move in the same direction.
C) one variable changes and the other does not.
D) neither variable moves.
Answer: A
Diff: 1
Topic: Graphing Two Variables
Skill: Definition
3) The slope of a curve measures
A) the change in one variable in response to the change in the other variable.
B) the length of the curve.
C) only the change in the horizontal variable.
D) only the change in the vertical variable.
Answer: A
Diff: 1
Topic: Computing the Slope Skill: Conceptual
AACSB: Reflective Thinking
4) Slope is calculated as the
A) change in the vertical variable divided by the change in the horizontal variable.
B) change in the horizontal variable divided by the change in the vertical variable.
C) the vertical axis divided by the horizontal axis.
D) change in the vertical variable.
Answer: A
Diff: 1
Topic: Computing the Slope Skill: Conceptual
AACSB: Reflective Thinking
5) The slope of a straight line
A) is constant.
B) is negative.
C) is zero.
D) changes along the curve.
Answer: A
Diff: 1
Topic: Computing the Slope
Skill: Conceptual
AACSB: Reflective Thinking
6) If the vertical variable increases by 12 and the horizontal variable increases by 4, the slope of the line is A) 3.
B) 4.
C) 12.
D) 48. Answer: A Diff: 1
Topic: Computing the Slope Skill: Analytical AACSB: Analytical Skills
7) If the vertical variable decreases by 16 and the horizontal variable increases by 8, the slope of the line is A) -2.
B) 8. C) -16.
D) 24.
Answer: A Diff: 1
Topic: Computing the Slope Skill: Analytical AACSB: Analytical Skills
8) Refer to Figure 1A.1. If the hours worked per week is 10, the income per week is A) 50.
B) 100.
C) 150. D) 200. Answer: B
Diff: 1
Topic: Graphing Two Variables, graphing Skill: Analytical
AACSB: Analytical Skills
9) Refer to Figure 1A.1. If the hours worked per week is 30, the income per week is A) 50. B) 100. C) 150. D) 200. Answer: D
Diff: 1
Topic: Graphing Two Variables, graphing Skill: Analytical
AACSB: Analytical Skills
Figure 1A.1
10) Refer to Figure 1A.1. The slope of the line between the points where income equals 100 and income equals 150 is A) 0.2.
B) 5.
C) 10.
D) 50. Answer: B Diff: 1
Topic: Computing the Slope, graphing Skill: Analytical AACSB: Analytical Skills
11) Refer to Figure 1A.1. The slope of the line between the points where hours worked per week are 10 and hours worked per week are 30 is A) 0.2.
B) 5.
C) 10.
D) 50. Answer: B Diff: 1
Topic: Computing the Slope, graphing Skill: Analytical AACSB: Analytical Skills
12) Refer to Figure 1A.2. If this consumer purchases zero movie tickets, how many DVDs will he rent?
A) 0
B) 30
C) 60
D) 90
Answer: D
Diff: 1
Topic: Graphing Negative Relationships, graphing Skill: Analytical
AACSB: Analytical Skills
13) Refer to Figure 1A.2. If this consumer rents 30 DVDs, how many movie tickets will he purchase?
A) 0
B) 5
C) 10
D) 15
Answer: C
Diff: 1
Topic: Graphing Negative Relationships, graphing
Skill: Analytical
AACSB: Analytical Skills
Figure 1A.2
14) Refer to Figure 1A.2. The slope of the curve
A) is negative.
B) is positive.
C) is zero.
D) changes along the curve.
Answer: A
Diff: 1
Topic: Computing the Slope, graphing Skill: Analytical AACSB: Analytical Skills
15) Refer to Figure 1A.2. The slope between points b and d is A) -5.
B) -6.
C) 10.
D) 30.
Answer: B
Diff: 1
Topic: Computing the Slope, graphing Skill: Analytical AACSB: Analytical Skills
16) The slope of a nonlinear curve
A) is constant.
B) is negative.
C) is zero.
D) changes along the curve.
Answer: D
Diff: 1
Topic: Graphing Nonlinear Relationships
Skill: Conceptual AACSB: Reflective Thinking
17) If the price of monthly DSL service increases from $20 to $25, the percentage change is A) 5 percent.
B) 20 percent. C) 25 percent.
D) 45 percent.
Answer: C
Diff: 2
Topic: Computing Percentage Changes
Skill: Analytical AACSB: Analytical Skills
18) If the price of a 2GB flash drive decreases from $30 to $20, the percentage change is A) -20 percent.
B) -33 percent.
C) -50 percent.
D) -60 percent.
Answer: B
Diff: 2
Topic: Computing Percentage Changes
Skill: Analytical AACSB: Analytical Skills
19) If you work 3 extra hours, and the slope of the curve showing the relationship between your income and work hours is 12, your income will increase by A) $4.
B) $9.
C) $15.
D) $36.
Answer: D
Diff: 2
Topic: Using Equations to Compute Missing Values
Skill: Analytical
AACSB: Analytical Skills
20) To increase income by $120 when the slope of the curve showing the relationship between your income and work hours is 15, how many extra hours will you need to work?
A) 8
B) 15
C) 105
D) 135
Answer: A
Diff: 2
Topic: Using Equations to Compute Missing Values
Skill: Analytical
AACSB: Analytical Skills
21) The origin of a graph is the intersection of the two axes, where the value of both variables is zero.
Answer: TRUE
Diff: 1
Topic: Graphing Two Variables
Skill: Definition
22) Positive relationships are also referred to as inverse relationships. Answer: FALSE
Diff: 1
Topic: Graphing Two Variables
Skill: Definition
23) Negative relationships are also referred to as inverse relationships. Answer: TRUE
Diff: 1
Topic: Graphing Two Variables
Skill: Definition
24) Slope is calculated as rise / run. Answer: TRUE
Diff: 1
Topic: Computing the Slope Skill: Analytical AACSB: Analytical Skills
25) Slope is calculated as a change in the horizontal variable divided by a change in the vertical variable.
Answer: FALSE
Diff: 1
Topic: Computing the Slope Skill: Analytical
AACSB: Analytical Skills
